What is Ben Stein Smoking?

Poor Brad DeLong has been beating

himself up by reading Ben Stein again. I do have sympathy

with him: I was happily reading the newspaper myself yesterday, sipping on an

excellent cappuccino from Tarallucci

e Vino, when the Stein

column loomed up in front of me like some kind of car crash I couldn’t turn

away from.

Brad’s already dealt with the inflation/unemployment silliness. But in many

ways it just gets worse from there. What does Stein mean, for instance, by this?

If oil, for example, becomes denominated in euros, the price in dollars rises

— perhaps significantly.

Er, no. If Tarallucci e Vino were to start denominating the price of its cappuccinos

in euros, and the dollar continued to fall, then certainly the price in dollars

would rise. But that’s because cappuccino prices are fixed. Oil prices, on the

other hand, are not: they change from day to day and indeed from minute to minute.

At any given point in time, oil has a price in dollars, in euros, in Venezuelan

bolivars, or even in pork bellies, should you be so inclined. If the dollar

falls, then oil might indeed cost more dollars. But that’s got nothing to do

with denomination.

But wait, Stein’s not done yet:

Allow me to deviate from our theme a moment to consider exactly what policy

makers and regulators in Washington might be up to when it comes to monitoring

chief executives.

A new low was suggested in that realm recently by news reports saying that

the Securities and Exchange Commission was considering allowing revisions

to corporate law that would bar stockholders from suing their own managements

in court for wrongdoing.

Instead, corporations would be able to require their owners — yes, their

owners — to go through arbitration instead of court litigation if they had

grievances. To say that this trivializes and betrays the ownership rights

of stockholders is putting it mildly. It’s really a betrayal of capitalism


No, it’s not a betrayal of capitalism, it’s a betrayal of tort lawyers. Shareholders

suing managers is a spectacularly inefficient way of trying to enforce rules

on how people should run a public company. Intra-company grievances between

owners and managers should be worked out in arbitration. Companies

have a real problem with the class-action lawsuits which pop up every time a

share price falls. They have nothing to do with "the ownership rights of

stockholders" and everything to do with those stockholders refusing to

take responsibility for their own investment decisions and wanting a do-over.

Arbitration is a good thing for genuine shareholder grievances, because they

are likely to be settled more quickly and without as much in the way of legal

fees. It’s a bad thing for people wanting to bring spurious lawsuits.

And then there’s the real clincher.

Another thing that preoccupies me, albeit on a slightly smaller scale, is

an enduring mystery of the retail economic world: why don’t people in

New York City want a Wal-Mart in Midtown?

Yes. A Wal-Mart in Midtown. Maybe we could tear down Rockefeller Center

and build one there. Or repurpose the Central Park Zoo as a big-box retailer;

the Sheep Meadow could be the parking lot. Obviously we’d need to give Wal-Mart

the space rent-free, or for maybe no more than a buck or two a foot, because

that’s how the company can offer us its everyday low prices. But doing so would

surely be worthwhile: "every New Yorker needs food and paper towels".

I only wonder how we’ve all managed to cope until now.

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